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CIPS L4M2 Exam (page: 3)
CIPS Defining Business Needs
Updated on: 25-Dec-2025

Viewing Page 3 of 30
L4M2 PDF 238 Questions

A purchaser is looking for alternative supplies if there is a major disruption to their supply chain, including logistics, manufacturing and all support services.
Which of the following method is that purchaser applying?

  1. Treat the risk
  2. Terminate the risk
  3. Tolerate the risk
  4. Transfer the risk

Answer(s): A

Explanation:

Risk control is the process by which an organization reduces the likelihood of a risk event occurring or mitigates the effects that risk should it occur. CIPS preferred way to determine your risk control strategy is to use the four T's Process:
Transferring Risk can be achieved through the use of various forms of insurance, or the payment to third parties who are prepared to take the risk on behalf of the organization Tolerating Risk is where no action is taken to mitigate or reduce a risk. This may be because the cost of instituting risk reduction or mitigation activity is not cost-effective or the risks of impact are at so low that they are deemed acceptable to the business. Even when these risks are tolerated they should be monitored because future changes may make it no longer tolerable. Treating Risk is a method of controlling risk through actions that reduce the likelihood of the risk occurring or minimize its impact prior to its occurrence. Also, there are contingent measures that can be developed to reduce the impact of an event once it has occurred. Finding an alternative sup-plier is an example of treating the risk.
Terminating Risk is the simplest and most often ignored method of dealing with risk. It is the ap- proach that should be most favored where possible and simply involves risk elimination. This can be done by altering an inherently risky process or practice to remove the risk. The same can be used when reviewing practices and processes in all areas of the business. If an item presents a risk and can be changed or removed without it materially affecting the busi- ness, then removing the risk should be the first option considered; rather than attempting the treat, tolerate or transfer it.


Reference:

CIPS study guide page 144
LO 3, AC 3.3



A procurement team is categorising their purchased items into four quadrants of Kraljic's supply chain portfolio matrix. They realise that there are some low-value items which come from very few suppliers in the market. The organisation is critically dependent on these suppliers. The team plans to reduce the dependence by finding alternative sources. Is this a right course of action?

  1. Yes, the organisation needs to reduce the supply risks
  2. No, the organisation should run competitive biddings to exploit the competition
  3. No, there is no way to escape this dependency
  4. Yes, this action will dramatically increase the supplier's bargaining power

Answer(s): A

Explanation:

According to Kraljic portfolio matrix, the low-value items with high supply risk are bottleneck items.



The purchasing strategy that is commonly recommended for these products is primarily based on acceptance of the dependence and reduction of the negative effects of the unfavourable position. An alternative strategy suggested by purchasing practitioners is to find other suppliers and move towards the non-critical quadrant.
- Accept dependence, reduce negative consequences: The main focus of this strategy is to assure supply, if necessary even at additional cost. Examples of this strategy are keeping extra stocks of the materials concerned or developing consigned stock agreements with suppliers. By performing a risk analysis firms can identify the most important bottleneck products and consider the implications. A possible action for dealing with unexpected bad dependence positions for certain products is to employ contingency planning.
- Reduce dependence and risk, find other solutions: This strategy is geared towards reducing the dependence on the supplier. The most common way to achieve this is to broaden the specifications of the product or to search for new suppliers.
The procurement team in the scenario has selected reducing dependency by finding alternatives.
This is a right strategy for bottleneck item.


Reference:

- CIPS study guide page 82-84
- Purchasing strategies in the Kraljic matrix--A power and dependence perspective, Marjolein C.J.
Caniels, Cees J. Gelderman
LO 2, AC 2.1



Which of the following is the structured approach for defining customer requirements and translating them into technical specification?

  1. Kano model
  2. Thomas-Kilmann model
  3. Quality function deployment
  4. Mendelow's matrix

Answer(s): C

Explanation:

Quality function deployment (QFD) is a method to transform qualitative user demands into quantitative parameters, to deploy the functions forming quality, and to deploy methods for achieving the design quality into subsystems and component parts, and ultimately to specific elements of the manufacturing process.

Kano model of excitement and basic quality (Kano et al, 1984; Berger et al, 1993; Matzler et al, 1996) brings a different perspective for the analysis of improvement opportunities in products and services because it takes in consideration the asymmetrical and non-linear relationship between performance and satisfaction. The Kano model classifies customers requirements in five categories: basic requirements, performance requirements, attractive requirements, indifferent requirements and reverse requirements.
Mendelow's Matrix is a tool that may be used by an organisation to consider the attitude of their stakeholders at the start of a project or when they are setting out strategic objectives. The Thomas Kilmann model identifies two dimensions when choosing a course of action in a con-flict situation, these are assertiveness and cooperativeness. Assertiveness is the degree to which you try to satisfy your own needs. Cooperativeness is the degree to which you try to satisfy the other person's concerns.


Reference:

CIPS study guide page 32
LO 1, AC 1.2



Which of the following factors might prompt an organisation to procure an alternative product? Select THREE that apply:

  1. Brand loyalty
  2. Relative value to money between options
  3. Buying organisation's propensities to change
  4. Easy access to distribution channel
  5. Threat of retaliation
  6. Switching cost

Answer(s): B,C,F

Explanation:

According to Michael Porter, the threat of substitution, is a function of three factors:
- The relative value/ price of a substitute compared to an industry's product
- The cost of switching to the substitute
- The buyer's propensity to switch
(Porter, Michael E.. Competitive Advantage: Creating and Sustaining Superior Performance (p. 278).
Free Press. Kindle Edition.)


Reference:

CIPS study guide page 92-97
LO 2, AC 2.2



XYZ Ltd is producing an engine which consists of many components. The procurement manager wants to find cost reduction opportunities and minimise part varieties.
Which of the following may help her to achieve these objectives?
1. Value analysis
2. Segment analysis
3. Variety reduction
4. Standardisation

  1. 2 and 3 only
  2. 1 and 3 only
  3. 3 and 4 only
  4. 1 and 4 only

Answer(s): D

Explanation:

Value analysis is often defined as a systematic process for improving the value of a product, service or project. It is typically used in the following ways:
- To determine the value of each component used
- To find cost reduction opportunities by optimising the components used

Segment analysis helps procurement and supply to shape and manage the supply markets.
There is no concept known as Variety reduction.
Standardisation is the process which is used to reduce varieties of products or parts. In this scenario, the company's objective is cost reduction, then value analysis or value engineering is more likely to be applied. Also the company aims at reducing variety, standardisation can be combined with value analysis to produce the best results.
LO 3, AC 3.4



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Tshepang 8/18/2023 4:41:00 AM

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